Interesting - I used the same analogy a few days ago. In the case of East Germany only a few had predicted that it would take a human generation the change the mentality deeply encrusted from the socialist regime. Greece has little industry but could further develop tourism. For the rest, the perspective is pretty dire.

1:36 pm July 8, 2011

Antonio Rodrigues wrote:

Very good article, interesting analysis. There are no quick fixes, but as far as I remember East Germany was poorer than Greece, Portugal and Ireland in 1990, and now it is richer. It is not as rich as West Germany, but it has come a long way. Let's hope that the same happens with the 3 little pigs.

9:32 pm July 8, 2011

John Shniper wrote:

Twenty one years is a long time: Certainly enough for the Eastern and Western regions of Germany to get within 80% of each other. Berlin was largely part of West Germany in 1990 and had a comparable standard of productivity and living. The failure to achieve close parity is purely one of bad government policies which have never been changed much less scrapped. The Unions and other powerful interest groups in the West refused to allow lower labor and tax and regulatory costs in the East for the most selfish and cynical of protection at any cost (to the Easterners) motives. This abuse of fellow compatriots was made more nauseating by cloaking it in "anti-exploitation" rhetoric!! How can this record of cynical abuse of countrymen
and women freed from imposed foreign totalitarianism create a strong united country?

1:47 am July 9, 2011

aloa5 wrote:

Yes and no.

Just have a look at the unemployment-rate of Greece (ILO).
1980: 4%
1990: 7%
1999:11,9%
2001: 10,4% (year before Euro)
2008: 7,7%

Yes: Greeec/GDR ... similar. But I think no: an own currency does not automatically generate a great performance, growing industry or something else. Own currencies perhaps prevent from borrowing too much money.

Another American who explains the world during the own country heads for collapse. Just use the same analogy for the USA! As a German I can say: We don't need american know-it-alls anymore. Greetz from Europe

9:56 am July 9, 2011

Tamer Kirac wrote:

Good article.

BTW Klaus, you need to get that chip off your shoulder.

In reading such wide sweeping comparisons, a little bit of historical perspective can add much value. Historically, in comparison to Germany, east and west, Greece was never an industrial nation as Germany and it did not have the institutions, social structures and associated values of a Germany. Impetus for recovery for Greece will be based on a different set of causes and its process will be different.

1:09 am July 10, 2011

Fritz wrote:

That comparison is not exactly new. I myself heard it first in April or so. Seems it is bound to spread more and more as a first simple approach to grip what's going on.
So let's follow the road it implies things will lead to.
1. Economical contraction ahead.
2.. Lots of Greeks will be left with "a chip on their shoulders" for a long long time, which is rather bad for the EU. It probably will be even worse, as East-Germans could clearly see they were still way better off than almost any of their former compatriots in Eastern-Europe. It was not only a hypothetical matter of political rhetoric and imagination. The "what if" was there to study in reality.
3. Greece has a much better starting position, as it is already well incorporated in European and international trade. So the bottom line will not be as low as it was in Eastern Germany.
4. Low wages alone won't spur economic growth, if there's even much lower wages next door. There has to be some kind of extra pro economic activity from Institutions, let it be tax exemptions or start up help for companies. (It took me years and a trip to Frankfurt to realize the obvious: High wage spots are the places of opportunity for the average motivated young people. They attract the best minds, increase willingness to adopt and change for the better and therefore also increase economical activity.)
As a result: Any national Greek policy should help to concentrate healthy economical activity in just a few spots.
5. A lack of headquarters makes sure you will stay 2nd at best for a foreseeable future.

Sure there's much more.

6:58 am July 11, 2011

Bjorn, Brussels wrote:

The wages in Eastern Germany had to be (promised to be) lifted as a prevention of Eastern Germans moving to Eastern Germany. Within a year after unification, everyone in Western Germany knew a handyman, dentist or architect from the East who just re-settled. This kind of brain-drain is wouldn't be to be expected for Greece.

Nevertheless, some European boom areas (mainly in Germany) are in desperate need of well-educated employees. A precondition would be to learn some German. Up to the young people in Southern Europe to take this opportunity or not. Perhaps the situation is not yet bad enough to make this move into a colder country, with 'colder' (wrong!) people and a difficult language.

8:45 am July 11, 2011

Andrej S wrote:

As a matter of fact, the greatest challenge to both the Greek and East German recoveries was/will be having the concurents of any East German/Greek industry being in charge of East German/Greek policy making.
The so called Treuhand in East Germany (and the Treuhand is now being proposed as a model for greece) woked like this:

Situation: The Socialist East German gouverment allowed "private" enterprise, provided that the "primacy of the state/party" was not challenged. This was usually done in the following way, if you wished to be an independent buisnessmen, you could go ahead but had to take large loans (with very low interest rates of about 1%, they were more akin to extra taxes) which can be likened to giving hostages. These loans were a tool of political control, and not really about money. After the reunification, the west german gouverment inherited those loans and promtly jacked up interest rates to 10%, which predicatbly lead to mass bankrupcies. Any East German buisness which went bankrupt due to this was then handed over to the "Treuhand", which would then give this buisness for a single D-Mark to a West German guy with the required connections towards Treuhand leadership.

In Greece, we again have debts with suddenly and drastically changing interest rates, undemocratic and unsupervised agencies that will control buisnesses broken by those interest rises, and a no doubt undemocratic and unsupervised handover of those buisnesses to "hand picked" so called "investors".

2:08 pm July 11, 2011

ulrich georg wrote:

when your Brussels 'pundits' of WJS-DOW put Greece and 1989 East Germany(EG) on the same footing without the slightest hint to the fundamental differences I can only smile - as an emotional reaction I can understand 'Klaus'. Have a short look at the facts: EG was an over-industrialized country, on order of the Soviet block which had needed tools and idustrial equipment. Based on 1930ies and 1950ies technology that was at least working and machinetools as well as railway-equipment for service to far Vladivostok. They 400 000 women working ar low cost for textile and mechanical camera, phone equipment etc. Chemicals were a horror of pollution - to clean that up and restructure Bonn paid 1400 billon € subsidies ...
ALL Greek foreign debt is 400 billion € and the helping neighbors include Holland and France -
EASY to carry them through without 'rating' from Manhattan speculaters!

IF - these cheaters start to behave, Trichet was in Aachen clear cut on that. It is a feud IN THE FAMILY!
Outside speculater (with absulutely unsustainable deficts) not welcome. We'll sort that out
CHRISTINE LAGARDE now with a CHINESE DEPUTY will gladly assist to that. UG

Add a Comment

Error message

Name

We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

About Real Time Brussels

The Wall Street Journal’s Brussels blog is produced by the Brussels bureau of The Wall Street Journal and Dow Jones Newswires. The bureau has been headed since 2009 by Stephen Fidler, who was previously a correspondent and editor for the Financial Times and Reuters. Also posting regularly: Matthew Dalton, Viktoria Dendrinou, Tom Fairless, Naftali Bendavid, Laurence Norman, Gabriele Steinhauser and Valentina Pop.